Top Wall Street Research Team Makes ZBH #1 Pick for 2021

Two Wall Street analysts, Mike Matson, CFA, and David Saxon, CFA, from Needham & Company, LLC have selected Zimmer Biomet Holdings, Inc. as their top pick for 2021.

Warsaw, Indiana-based Zimmer Biomet, founded in 1927, is both one of the oldest surviving orthopedic companies and one of the largest with product offerings serving literally every corner of the orthopedics community. For 2020, Walls Street’s research departments expect ZBH will report more than $7 billion in revenues and then add another $1 billion in new sales in 2021.

Of the 28 Wall Street analysts who research ZBH and offer opinions about the attractiveness of its equity, 17 rate it a “Buy” or “Strong Buy.” Eleven rate ZBH as a “Hold” or “Underperform”. In 2020, ZBH’s equity price has been as low as $74.37 and as high as $165.15. As of this writing, the ZBH’s price per share is $148.74.

Finally, it should be noted, that owners of Zimmer Biomet’s stock also receive a cash dividend of $0.96 per share.

Matson and Saxon selection of Zimmer Biomet as a top pick for 2021 comes on the heels of a very interesting announcement by ZBH regarding its latest technology move—specifically ZBH’s acquisition of a novel smart implant technology which Matson and Saxon think could become a “significant growth driver.”

That technology comes from Zimmer Biomet’s arrangement with Canary Medical Inc. and the plan in 2021 is to launch a remarkable smart knee implant to collect and analyst real-time knee data and communicate that to the patient’s care team via the cloud. This cutting edge technology, says ZBH, will be incorporated into a Persona-IQ smart knee, which Matson and Saxon believe could be the first smart knee implant to market.

As it tuns out, ZBH was also Matson and Saxon’s top pick in 2020. What makes 2021’s top pick unique is the expectation that COVID-19 will recede as a factor in 2021 and that could “see its [ZBH’s] revenue growth accelerate due to improved inventory, new products, and improved sales force morale.” Furthermore, “new product launches and improving sales force morale should cause its revenue growth to improve to a level above its weighted-average market rate growth.”

The analysts acknowledged that the COVID-19 pandemic presented many challenges for Zimmer Biomet in 2020, especially for its “mostly elective procedure mix.” As many recall, this elective procedures came to a standstill for several months in 2020.

Looking towards the next couple of years, Matson and Saxon expect stronger earnings per share growth as well as price-to-earnings (P/E) multiple expansion. Based on Zimmer Biomet’s smart implant launch the analysts had also raised their price target. Of course, all projections are subject to a withering number of caveats including but not limited to acts of God.